Grangemouth closure could force downstream converters to shut

23 October 2013 17:39[Source: ICIS news]

LONDON (ICIS)--The UK government still hopes to find a way for production to continue at the Grangemouth, UK, petrochemicals plant operated by INEOS, the Energy Minister Edward Davey said on Wednesday.

The Switzerland-headquartered company announced that the plant is to stay closed after being wound down ahead of an expected walkout last week, raising concerns for downstream users over material produced at the site and the viability of chemicals production in the UK.

However, the government is still hoping that a solution will be found that allows the complex to come back online.

“We want this petrochemicals plant to stay open if at all possible,” he said while taking questions on the closure in a UK parliamentary session.

A Scottish Minister said earlier this week that talks had taken place between the Scottish government and potential buyers for the site during the dispute between INEOS, union Unite and Grangemouth employees, in the event that the site stays shuttered.

There have also been calls for the UK or Scottish government to nationalise the site.

However, an INEOS spokesman stressed on Wednesday that the complex remains loss-making, and that it is not a desirable asset under current conditions.

“We have been in contact with our partners throughout this process, and what you have to recognise is this site is losing £10m [€12m, $16m] a month. It needs £300m invested in it, and while shut down it is losing £2m every day.

“There is significant financing needed for the site. It needs to find new raw materials, the North Sea is running out, we need new ethane. This is a distressed site, and as such we have now approached the services of a liquidator,” he added.

Liquidation is expected to commence within a week, according to INEOS.

INEOS has called for grant money from the Scottish government and loan guarantees from the UK government for the construction of a new gas terminal infrastructure for US-derived shale ethane to be imported, and has attempted to reform the site’s employee pension plan, which it claims comprises 65% of current salary costs.

It put these measures to an employee vote during the shutdown, announcing today that the complex would remain closed if workers failed to vote in favour of the reform measures. It said on Wednesday that half of the site’s workers had voted against the proposals, and as such the complex would remain offline.

At present, the Grangemouth oil refinery also remains offline, and INEOS said that it is discussing with joint venture partner PetroChina whether to restart full operations.

Davey claimed today that he has received assurances that the facility will be brought back online.

“INEOS have informed us that the refinery will stay open and the management wish to restart full operations as soon as possible,” he said.

“Even at this late stage, I urge INEOS to continue dialogue with the workforce, and government will offer help and support with this,” he added.

The petrochemicals complex is wholly-owned by INEOS, while the refinery is owned 50/50 by INEOS and PetroChina.